Canada Revenue Agency (CRA) HST Audit
Canada Revenue Agency CRA HST Audit
The Canada Revenue Agency (CRA) frequently conducts HST audits and reviews to make sure Canadians are complying with the regulations. CRA HST Audits can also be referred to as GST Audits or GST/HST Audits. GST/HST audits focus on GST/HST filing errors and omissions. The CRA does have the right to examine records of the organization that are relevant to determining its tax liabilities.
What causes a CRA HST audit?
The CRA has a complex computer system that allows it to select returns to be audited by sorting them into various groups. There are four common ways the CRA selects files for audit:
- Computer-generated lists – In order to select specific returns for audit, the CRA often compares selected financial information for current and previous years of taxpayers engaged in similar businesses or occupations.
- Audit projects – The CRA often tests the compliance of a particular group of taxpayers, particularly if there is reason to believe that there is significant non-compliance within a group.
- Leads – Leads for audits often are the result of other audits or investigations, as well as information from outside sources.
- Secondary files – A business may be selected for audit if it is associated with another file that is being reviewed for audit, since the CRA often finds it convenient to look at all the records at the same time.
What is the CRA’s new approach?
The way the CRA conducts its audits has changed over the years. The CRA has switched from a combined audit approach to a detailed approach. In the past, most audits of smaller businesses have been done as combined audits – one audit covering both income tax and GST/HST. Combined audits have now been discontinued. Therefore, businesses are now subject to an income tax or GST/HST audit, leading the CRA to request more detailed information.
What can you do to prepare for a CRA HST audit?
Before you release any information to the CRA, make sure you seek professional advice. Once the information has been released the CRA can use it against you to assess penalties and interest. This requires you to be well prepared and know your rights as a business owner. In case of an audit remember the following:
- Maintain good records: Organize the receipts and documentation to support your claims. You are required to keep your records and supporting documents and financial information for at least six years. Well-kept records will likely reduce the time required to complete the audit. some tips on good record keeping include:
- Ensure you have copies of any GST/HST elections you have been relying on.
- Ensure your documentation is neatly organized and in order. The CRA will likely request a copy of your electronic books and records.
- If you have a combination of exempt and taxable supplies, ensure your ITC allocation methodology is documented and explained.
- Be knowledgeable: Before the auditor begins the audit, confirm what taxation years are under review and what records he or she will require. This will ensure you have the required information ready for the auditor upon arrival.
- Know your rights: Don’t give the auditor full accessibility to your files. Understand your rights as a taxpayer and exercise them when necessary.
- Understand the information you are providing: Carefully review all information provided to the CRA and ensure that you are not providing more information than required.
- Be courteous and professional: It is important to cooperate with the CRA and provide them with the information they request. However, always remember your rights as a business owner. Responding promptly and professionally to all correspondence received from the CRA may help complete the process faster and smoother.
A CRA audit can be time consuming and costly when you don’t have the right resources. For assistance, contact Cheema CPA Prof. Corp. and we will work with you through this process.
What are your rights GST/HST CRA audit?
Your rights are outlined in the Taxpayer Bill of Rights, which states the 16 rights that apply to all taxpayers and registrants. This video, will mention three of the 16 rights that we want to highlight for you as you go through the audit process.
- Right number three says you have the right to privacy and confidentiality. Auditors must respect the confidentiality of tax information and are obliged to take safeguards to protect your information.
- Right number five says you have the right to be treated professionally, courteously, and fairly. You should expect this treatment from an auditor.
- And right number six says you have the right to complete, accurate, clear, and timely information. You should expect to be kept informed throughout the audit.
If you need to learn more about your rights as a taxpayer please refer to the Taxpayer Bill of Rights.
Who can help during a GST/HST CRA audit?
Having the right team of professionals handling your HST audit is the key to success. As a taxpayer and a business owner you have rights. Before you release any information to the CRA make sure you seek professional advice. Once the information has been released, the CRA can use it against you to assess penalties and interest. Our firm is specialized in CRA HST Audits and Reviews. We can help you achieve a favorable result. Our team of lawyers and tax accountants can professionally handle your CRA HST Audit or Review.